Budget Comment March 2001
Introduction
The main question arising from this Budget is: how does the Press manage to write so many column inches?
Once you clear away the spending bits, the political bits, the measures coming in over a year from now (unless there is a change of Government!) and the technical changes to existing legislation, there is nothing to comment on.
Instead we set out:
- Rates and Allowances for 2001 and 2002
- Measures previously announced that start on 6 April 2001
- Some Politics
Rates and Allowances
Rates and allowances for income tax, corporation tax, capital gains tax, inheritance tax and the pension schemes earnings cap are set out below.
| 2000-01 (£) |
2001-02 (£) |
Increase (£) |
|
| Income tax allowances | |||
| Personal
allowance Personal allowance for people aged 65-74 Personal allowance for people aged 75 and over |
4,385 |
4,535 |
150 |
| Income limit for age-related allowances | 17,000 |
17,600 |
600 |
| Married
couple's allowance for people born before 6 April
1935 Married couple's allowance –aged 75 or more Minimum amount of married couple's allowance |
5,185 5,255 2,000 |
5,365 5,435 2,070 |
180 180 70 |
| Children's tax credit | - |
5,200 |
- |
| Capital gains tax annual
exempt amount: Individuals etc Other trustees |
7,200 |
7,500 |
300 |
| Inheritance tax threshold | 234,000 |
242,000 |
8,000 |
| Pension schemes earnings cap | 91,800 |
95,400 |
3,600 |
| Taxable bands 2000-01 (£) |
Taxable bands 2001-02 (£) |
||
| Starting rate 10% | 0 – 1,520 |
Starting rate 10% | 0 – 1,880 |
| Basic rate 22% | 1,521 – 28,400 |
Basic rate 22% | 1,881 – 29,400 |
| Higher rate 40% | Over 28,400 |
Higher rate 40% | Over 29,400 |
| Corporation tax profits 2000-01 and 2001-02 (no change) (£) |
|
| Starting rate 10% | 0 – 10,000 |
| Marginal relief | 10,001 – 50,000 |
| Small companies' rate 20% | 50,001 – 300,000 |
| Marginal relief | 300,001 – 1,500,000 |
| Main rate 30% | 1,500,001or more |
National Insurance
| 2000/2001 |
2001/2002 |
|||
| Class 1 Employees | ||||
| On first | £76 pw | Nil | £87 pw | Nil |
| Between | £76 - £535 pw | 10% | £87 - £575 pw | 10% |
| Over | £535 pw | Nil | £575 pw | Nil |
| Class 1 Employers | ||||
| On first | £76 pw | Nil | £87 pw | Nil |
| Between | £76 - £575 pw | 12.2% | £87 - £575 pw | 11.9% |
| Over | £535 pw | 12.2% | £575 pw | 11.9% |
| Class 2 Self employed | ||||
| Flat rate | £2 pw | £2 pw | ||
| Class 3 Voluntary | ||||
| Flat rate | £6.55 pw | £6.75 pw | ||
| Class 4 Self employed | ||||
| On profits between | £4,385 - £27,820 pa | 7% | £4,535 - £29,900 pa | 7% |
| (maximum annual contribution) | £1,640 | £1,776 | ||
Measures previously announced that start on 6 April 2001
Nowadays the Chancellor’s Taxation announcements usually take effect over a year after the Budget. A good example is the ‘replacement’ of the Married Allowance with Children’s Tax Credit. The fact that there was a gap year between the abolition of the one and the introduction of the other was not headline news. But this slight of hand saved the Treasury around £2 billion and cost nothing in adverse comment. Not bad for an afternoon’s work!
Here are the big changes announced some time ago:
- Pensions
- Children’s Tax Credit
- National Insurance: see the above chart.
Some Politics
The FT on 10 March 2001 showed a comparison of the three major parties attitudes to Personal Tax. The most striking was the difference between Labour and Tory on the subject of Inheritance Tax.
Apparently one of them has no plans for the tax, the other has plans to increase the exempt amount from £242,000 to £500,000, and give special exemption for primary residences. Email: BlytheTax and be surprised which is which…
Both Labour and Tory favour the recent move from Benefits to Tax Credits (like the new Children’s Tax Credits). We support the politics of this, but we are not sure what to think about the fact that it will require maybe 2 million more people to complete Tax Returns!